I'm proud we've put up the price of milk - we HAVE to help struggling British farmers survive': Dairy Crest boss Mark Allen on how he calmed a rural crisis

Dairy Crest chief Mark Allen makes an unusual boast – his company has put up the price of its core product by 10 per cent in the past year.

It is not the sort of thing chief executives usually want to draw attention to, but as Allen himself points out, his job at the helm of Britain’s premier dairy processing company is a balancing act – on the one hand there are the customers, on the other are the farmers.

Last year farmers blockaded Dairy Crest plants in a protest against cuts to the price they were being paid for their milk.

‘In the summer of last year farmers were having a particularly tough time. Their costs were going up at a time when the amount we could get in return for the products – cream for example – was going down.
‘We were reducing the prices we paid and farmers were looking for increases,’ says Allen, 54.

He admits the cut in the price paid to farmers was a mistake. Since then he has built bridges by pushing through rises to his customers.

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In practice he had little choice, again as he admits, other than to make an effort to look after his suppliers, but it is testimony to the strength of the group that Allen could manage this tough challenge.

Dairy Crest products are massive sellers. Its Cathedral City cheddar is to be found in more than half of all fridges in Britain and is regarded as one of the great brand successes. Its other brands include Clover and Country Life butter, and its milk is sold in almost all of Britain’s supermarkets.

Allen is now fighting a new battle against the thousands of tons of cheese imported into Britain but sold with a UK label because of what he says are ridiculous EU rules.

But the milk price demonstrations are still strong in the memory and Allen is now keen to burnish his pro-farmer credentials.

Successful: Cathedral City cheese accounts for about 10 per cent of the entire UK cheese market

‘Quite often people say because we’re a plc we can’t look after farmers, but we don’t have any choice. We need milk to make our product so we’ve got to be fair on the farmers and we’ve worked very hard over the last two or three years to try and demonstrate that.

‘We still take very seriously our role in the countryside and the role we play in trying to make sure that the dairy industry is viable from a farming point of view.’

Healing the rift with farming has been a deliberate strategic step. ‘We took a conscious decision there that we were going to change the way that we did business. The first thing we did was to sign up a code for the way that farmers and people they supply their milk to work together.

‘The basic reason why we did it was to try and bring some trust back into the organisation.

‘The second thing we did was to say we have to find a way of taking the motion out of price movements. So we worked very hard on a formula that took into account farmers’ costs as well as something of the things that impact us. We are the first dairy company to do that. It is something we are very proud of and it seems like it is working. And the third thing we did was actually move prices up – they are 10 per cent higher now than they were in the summer last year.

‘That was very difficult to do at the time because it meant we had to go out and get prices up from our customers.’

On November 1 the price Dairy Crest pays to farmers for milk will rise again by 1p to 33p a litre. That will have to be passed on to retailers. It is up to them whether they in turn pass this latest increase on to customers.

Allen, who says he had a ‘very working class’ upbringing in Staffordshire, began his career as a policeman in Bermuda before working as an area manager for Shell and eventually becoming a depot manager for Dairy Crest when it was owned by the Milk Marketing Board, a Government agency set up after the ravages of depression in 1933 to buy and market the vital food.

The MMB was dissolved in 1993 and its processing arm was turned into the company Dairy Crest, which listed on the Stock Exchange in 1996. But while now a purely commercial venture, Allen argues Dairy Crest is thoroughly British.

The move from Government agency to commercial company is epitomised by Cathedral City cheese, which accounts for about 10 per cent of the entire UK cheese market and turned over £231.3million last year, making a profit of £33.3million.

The product now ‘defines Dairy Crest’, says Allen.
And Cathedral City is not Dairy Crest’s only success story. It also has 18 per cent of the highly competitive butter and spreads market with Clover, Country Life, Utterly Butterly, Vitalite and Willow, as well as Country Life and Frijj milk, Davidstow and Chedds cheeses and its own milk delivery business called Milk & More.

It reported a pre-tax profit of £47.7million last year after selling its St Hubert cheese brand for £341million. It is now seeking British acquisitions.

Allen says: ‘We are British through and through. Cathedral City is made from great milk from about 450 or so farmers down in Cornwall.

‘We only put cheese made in our factory in Cornwall into Cathedral City. That isn’t necessarily true with all cheeses, but it is true with us.’

The best-selling cheese in the UK…and a spreading empire

Top brands: Dairy Crest names such as Clover are instantly familiar to shoppers

Davidstow in Cornwall is not a city and it has no cathedral. But it is home to Dairy Crest’s flagship product, Cathedral City Cheddar, which is the UK’s best-selling cheese brand.

It was voted the 10th most popular brand by the public in YouGov’s Brand Index, beaten only by the likes of Apple’s iPad, John Lewis and Sainsbury’s.

The dairy category in UK supermarkets accounts for £10billion of sales every year or about £386 per household every year. Dairy Crest buys milk from 1,250 farms and supplies a third of the country’s milk.

Waitrose, Sainsbury’s, M&S and Morrisons – and thousands of independent convenience stores – are also key customers. While most milk is sold under the retailers’ labels, it has its own Country Life brand.

Dairy Crest has 18 per cent of the UK butter and spreads market, with its Clover, Country Life, Utterly Butterly, Vitalite and Willow brands. Clover is the number one dairy spread and Country Life the number three UK butter.

Dairy Crest is investing £38million in merging the spreads production on to one site in Merseyside next year. And it is soon to enter the snack market with Cathedral City Baked Bites in collaboration with Burton’s Biscuit Company.

Dairy Crest is also investing £45million in the production of whey baby products, which will start in 2015. Allen says Dairy Crest hopes the baby products will help it expand its export business, especially in Asia.